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tv   Bloomberg Markets Americas  Bloomberg  March 14, 2019 10:00am-11:00am EDT

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minutes into the trading day in the united date. from new york, i am vonnie quinn. guy: welcome to bloomberg markets. bonnie: market -- vonnie: markets are unchanged. some stocks on the move in the first half hour of trading downgradellar general , making it the worst performer in the s&p 500. facebook down 2.1% after the new york times report last night and general electric kata roller coaster morning start in early trading lower and now higher after maybe some reassuring words from those in control of various units. we will talk about it in more in a few moments. of the big story is likely to be brexit. for you,ought up cable the pound versus the u.s. dollar
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rallying last night as we got the decision by mp's to take a no deal brexit off the table. theresa may talking about going back for a third bite on the meaningful votes and certainly -- volatility in the european stocks reasonably well bid. we are seeing metals under pressure, copper trading lower. weak industrial trading data out of china and week ip data around the world over the last few days . we continue to see week data out of germany. nevertheless, the weak china story reflected in metals and that has been feeding into the mining stocks. vonnie: for more on markets and market movement, let's bring it back to new york.
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we are lucky to have romaine bostick with us. team ands on our life lots of other teams on bloomberg. we are seeing u.s. markets -- not seeing u.s. markets move too much today. in the u.s., we still have company guidance calls. you obviously had developments or lack of developments with trade and that is weighing on the market. what you are seeing in the price action today, kind of a carryover from what we have seen . basically everything the market knows or thinks they know is priced in and nobody is trying to get ahead of that until we get more clarity on trade and a lot more clarity on the economic picture. we are getting so many conflicting data points with regard to the health of the economy. traders want more confirmation this is a trial and the economy will re-accelerate at some point maybe later this year or into 2020.
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guy: the pound feels like an emerging market currency. through the market internals. vonnie: you are talking -- romaine: you are talking about the world's best performing currency. every step we have had in the rally, the shorts have added to the position. this is the most short we have seen this market for quite some time if you look at it in aggregate. bylly, this is really a bet the shorts, that we are in for a very rocky ride with regard to what is going on on your side of the ocean, whether it is a hard fallout or if there is a negotiated deal. there is still months if not deals -- years of economic fallout. very attractive, there is some sense the u.s. economy is on stable footing and somehow theresa may will find a way to
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pull a rabbit out of her hat. index, we have been ceiling --seeing a nice rally. romaine: there are calls from market strategists basically saying get back into u.k. risk assets. retailers, local banks, and think about this. on a relative valuation basis, whether it is the ftse 250 or ftse 100 relative to the stoxx, indexes,0 or u.s. probably the most undervalued we have seen in that role years. a lot of people are saying this is basically bargain-hunting and you will have companies that will soldier on no matter the outcome of brexit and strategists see this as a way to buy in now. i think a lot of folks are seeing potential. guy: how much damage is being done to boeing?
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romaine: it is hard to say. you have two big issues. the first is the order book, about $491 billion for the 737 max alone and 600 billion on the commercial side is not going to change. we know it takes a lot to shift orders given the lag time you need to build a plane. we are hearing from companies in airlines in russia, kenya, and other parts of africa reconsidering orders they have with boeing or asking for some type of consideration from bowing with regards to everything going on. in addition to that, you have macron making his way through africa really banging the drum on airbus. been creating their own single body jet. there is concern if boeing doesn't find a way to win the public relations battle on this
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in short order, you could see orders shift to rival companies. -- kenyae are seeing airways, russia, all reconsidering orders. at what point do we see major economies and those airlines reconsidering orders? takene: again, it will some time. one thing i urge our viewers to keep an eye on is a lot of the parts suppliers. we had a story on the bloomberg terminal about how these aircraft leasing companies are saying most of these airlines are going back and saying we want older 737 models. we can fly these until we figure out what is going on with boeing. that will be a boon for mechanic and service companies because they require maintenance. the downside for boeing's if you start using older models, that buys the airlines more time to reconsider the orders they have with boeing and if this drags
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on, they could say let's go with airbus. vonnie: romaine bostick, thank you. romaine: absolutely. guy: let's check in with bloomberg first word news. here is kailey leinz. kailey: beto o'rourke has numbed into the race for the democratic -- jumped into the race for democratic presidential nomination. set piecekipped the announcement and used a video to declare his running and is off today -- off to declare in iowa. todaynate will vote whether to block president trump's emergency declaration. interferes with authority to determine how tax dollars should be spent. if the bill passes, president trump said he will veto it. opec is urging members to prevent and oil surplus. key opec companies and their allies meet to review output
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curves. the cartel has been trying to defend prices. opec has been expecting demand growth to slow. two students suing a number of colleges in the wake of criminal charges filed in the admissions scandal. the two say they were denied a fair chance to apply for admissions at yale and the university of southern california. ucla and georgetown are also named. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. ge'swe will talk aboutge earnings. cash flow and what is happening within the business. i think the market got freaked out, but has bounced back. there is the issue of the boeing story as well. david joyce is on the phone. it will be interesting to see
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what ge's view of what is going on with the 737 max. this is bloomberg. ♪
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guy: live from london, i am guy. .onnie: i am vonnie quinn this is bloomberg markets. let's get a check of the markets. abigail: global investors and stock investors looking for direction. down by about .2%. this on the trade meeting delay between the u.s. and china. that has the shanghai composite down 1.2% losing more than 2% a last two sessions. stoxx 600 up.
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as for the s&p 500, lots of interesting things happening. let's see what is going on over the last 6 months. here's a close-up of the range between 2600 where buyers stepped up around 2800 where sellers stepped up -- 2017 is the level7 is rejected yesterday. that tells you you will have near-term reaction to the downside. as for some of the big movers on the day, let's take a look at the leaders and the laggards. ge up 3.5%. i know you will talk about that with an analyst. they said they could generate cash flow in 2020 and 2021. dollar general, the outlook weighing on those shares, giving back some of yesterday's gains. shares of ge also
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volatile starts or it up more than 3%. we had a guidance call full-year earnings forecast missing estimates. they expect cash flow to be as low as -$2 billion. there were optimistic comments as well. here for context is karen uber heart. there was a selloff in early trading. $.67 consensus -- who knew that was all over the place. all he said was negative cash flow and framed it flat -$2 billion. i think that was better than people expected. they will be positive cash flow when you take out restructuring. he is moving forward the spending on restructuring because he wants to get power fixed sooner. vonnie: that is a good thing.
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karen: on an operating basis, power will make money. that is better than people suspected -- expected. just think, he gave a lot of detail, a deep dive you don't typically get that allayed some fears. he did a good job. guy: picking up on that, was this an optimistic call from ge? karen: i think it was quite realistic. he said the power problem will be with them 2019, 2020, and will not look better until 2021 . overall, what they are doing, they seem to have their arms around stabilizing things. he also showed other asset sale opportunities. the cash fears i think are going away because he is raising cash faster in a bigger way than people expected. vonnie: we will check in with you later in the day.
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we have citadel's ken griffin in an exclusive interview with david rubenstein. >> you don't actually live in new york, you live in chicago. ken: chicago is home. david: let's start with your beginning. you grew up in florida. is that right? ken: i was born in daytona beach and my father worked on the states program. he worked -- he moved to wisconsin, so i grew up in florida, wisconsin, we went to texas for a time and back to florida for middle school and high school. david: you went to high school in florida. were you top of your class or something like that? [laughter] -- deloresas laura's . i did okay, wasn't top of the class. many: you applied to colleges and harvard and harvard, you got into.
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to get into harvard, you have to be top of your class. were you surprised or did you think you were going to get in? entirespent my professional career working on probability. odd stocks to go up versus down. when i applied to college, i played the same game. using a typewriter, i typed about 13 different college applications. david: so your chance of getting in each of them, you applied to 13 colleges? ken: i will get into one of them. david: you were the president of the mass club in high school. i guess you were good at math? ken: i was pretty good at math. david: you got into harvard and when you got in, did you decide to go right away or you wanted to see if the other schools would accept you? ken: that is a complicated story. my father's business partner was a princeton graduate. princeton was my first choice
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and my father had a falling out with his business partner just before the time you pick when you are going to college. my dad said it would break his heart if i went to princeton and i went to harvard. david: that has broken the heart of the princeton development people, i assume. ken: one of my partners at citadel, who i had the pleasure of working with for two decades served on princeton's investment committee oversight and i think he has done wonders to help princeton feel better. david: you go to harvard and most people go to harvard and don't know when they get there, whether they will be smarter than everybody else or not as smart. when you got there, did you say these people are not as smart as i thought they would be? ken: i am pausing because i never actually thought about that. i am soharvard, fortunate, i am at one of the greatest institutions of higher education in the world. david: the legend is uv game --
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you began trading convertible bonds out of your dorm room. ken: that is true. david: did you do that freshman year or later? ken: my freshman year, i am at bloomberg and i need to say a moment of gratitude to everyone in the press. there was an article in forbes on home shopping network written by gretchen at the new york times. on howa great article home shopping network was overpriced and having read this article, i bought two contracts home shopping network and the stock plunged hurried when you make money as a freshman, you are rich. this is the moment you have dreamed of. that was what really started my interest in trading. guy: you had never been that involved before? ken: i never traded a financial
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asset before then. guy: you started doing more of that? ken: the most defining moment of my career in some sense was i went to sell these contracts and these were the days of floor based trading, no electronic trading markets and in the good old days when you went to sell, the market maker would tell you less than the intrinsic value. i realized the market maker's profit was risk-free. in a sense, you are going to get a kick off of this, $50 off of me in a risk-free way and that drove my interest in the pricing of derivatives, which is what arbitrage, howd does one price and equity derivative as compared to common stock? david: your classmates are presumably doing other things. what did they think of you? anomaly.s a bit of an my classmates and i, same
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experience we all had, we debate politics, have fun playing soccer in the yard at sunset and hope not to run into a tree, and your friday night fun. it was a college experience, but i spent a lot of time at baker library trying to understand and learn about finance. david: the story is you installed a kind of receiver in your room so you could receive data. is that true or is that a legend? ken: it is true. in this is the early days of harvard saying no to any form of business on campus. the supervisor of the building gave me permission to put a satellite dish on top of the building so i could have real-time stock books because we are before the days of the internet, there is no way to get quotes other than for example satellite dish. i threw the cable over the side of the building, pulled it in
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through the window and down the hall of my dorm room and i had access to real-time prices to facilitate trade. david: did you have a roommate that said this is not a good thing to do? ken: i purposefully chose a single so i would not have a roommate i would annoy every day. david: you presumably did well and so by the time you i wouldd, did you say -- what would you have done if this had not arisen? ken: there are two stories in that question that i think are worth talking about. i work with portfolio managers for 30 years. timing is so important in your career. in bondtarted to engage arbitrage, i launched in september of 87. i was confident how this portfolio would behave in a bull market and uncertain how it would behave in a bear market.
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the mathematics are much more nebulous than on the way up. stock --rt more what happened later was the crash of 1987. at that moment, i knew i -- i became boy genius. i knew i was boy lucky. investors said he is a genius, he made money in the crash. the defining moment of my career was the crash of 1987 and being that short gave me a track record that was invest -- attractive to investors. david: you made money for this group of investors. you had investors in college? some people gave you money? camea gentleman name sal in to chat with my friend and i and my friend said tell him what you are thinking about doing in the bond market.
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he says, i have to run to lunch, but i am in for $50. i had no idea, but my friend was like, you just got your first $50,000 to manage. that was what gave rise to the start of my trading career. david: if you had not succeeded this way, what would you have done when you graduated from harvard? ken: my dream was to do private equity. david: wow. the highest calling of mankind, as i said. 1980's, thisthe was the moment when private equity was first hitting mainstream america. businesse of every magazine and i thought how incredible the opportunity to reshape business is in a very profound way that was not being done in public markets. david: in those days, people who went to harvard interested in
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business would often go to harvard business school or another business school. did you think about that? ken: i did. i called harvard business school .- i want to go here i took sophomore standing my first year. , youu pass enough ap tests can complete your degree in three years and i wanted to go right to business school. harvard business school said no, you have got to go work, you cannot come here until you have had your two years of work experience. of the answer is i actually wanted to go to harvard business school and was denied. david: you and warren buffett both did not go into harvard business school. ken: that is a fair way to put it. david: you decided you would set up a trading operation. let's explain to people what a convertible bond is. ken: a convertible bond is a
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debt instrument issued by a company exchangeable for the common stock of the issuer. often issued by companies in periods of rapid growth where the ability to place yield would be limited because of uncertainty in the business model and because of rapid growth, it has high-level volatility, which makes the conversion feature attractive. companies like tesla, or amgen. we have participated in those offerings over the years. david: you graduate and say i will set up my own company and your family says you are young to set up your own company or do they say this is a good idea? ken: i was incredibly fortunate. my father was the first generation to go to college, one of 7. my grandfather worked on the railroads, my parents always placed great importance -- importance in education. my grandfather was an
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entrepreneur. he borrowed money from my grandmother's mother to start a small business and ended up in the fuel oil business. that entrepreneurial bug was part of my mom's entire life. she grew up in a family defined by my grandfather who was a bit of a maverick. the idea i would go off and try to pursue this dream to my parents was very much go for it. david: you decided not to go to new york, you decided to go to chicago. why chicago? ken: it was a tough choice. most of my friends going to new york and the firm that backed me .ut of college had two partners the gentleman in new york was central in wall street.
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schoolas like my high physics teacher. i had a trust and camaraderie with frank that as somebody who graduated from college and this is how i am going to make my career bet, i want to be close to frank. that brought me to chicago and lo and behold, you find yourself two years out of school and chicago is home. david: where did you get the name citadel? ken: the first name we used was wellington asset management. a small firm in boston sent me a letter and pointed out they had used this name for many years and build a very successful business and suggested i find a new name. with all due respect, they were extraordinary polite -- extraordinarily polite about it. i never faulted them. no cease-and-desist, they were .ompletely gentleman about this
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i asked all my employees, come up with names for our firm. we put together a spreadsheet of a few hundred names. we landed on citadel because it is a sanctuary, a safe place, a fortress in times of distress. that had the connotations of who we were, focus on capital preservation, focus on being that safe place for your capital. david: you never considered griffin and company, for example? ken: the earliest names we used all came from british roadmaps. take out a map of london and find names from the london roadmaps. wellington, kensington, names that noted a timelessness. citadel is where we ended up. david: how many employees when you first started and what year did you start? ken: the official launch of our first hedge fund was 1990 and it
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was probably my for -- myself and four or five employees. david: you did it as a hedge fund and a hedge fund is one where you typically get money in and get 20% of the profits or something like that if you get above a certain hurdle. is that why you went the hedge fund format as opposed to other format? you could have done regular long only asset management where there is no percentage of the profits. ken: never gave much consideration to the latter. the hedge fund model i thought really matched with what we were trying to do. we were trying to create for our capital partners a stream of income uncorrelated to the --ket, a very sharp ratio high investor rate of return. we had a different business model than most. our other data only form of profit was our remote.
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we were aligned with customers in driving performance. guy: did you have to go -- david: did you have to go out and raise money with investors? or were you just worried about the trading operation? ken: you and i have run into each other at places like the beijing airport. we get to work for hundreds of people around the world and we have to be on the road to raise capital. in the early days, frank mayer was a fantastic partner to help me raise capital. his vouching for me was incredibly important to my success and i was on the road. david: were you giving erect into the traders about what to buy or how did you deal with that? ken: we had a series of models and analytics that helped to guide our trading decisions. i was fortunate to have hired a handful of colleagues who
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understood the products and had -- what was most important to my life journey was we traded 24 hours a day from almost day 1. we traded convertible bonds in the united dates, japanese in tokyo and converted market in europe. i could only be at work 13, 14, 15 hours a day. i had to learn to delegate. if i look at our success over 30 years, it really comes down to have learned to trust people, trust their judgment, and delegate. david: when you use the word trading, sometimes the image is trading for an hour and you see profit and go onto the next --ng or sometimes holding typical patterns were months, not years.
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that would have been typical. it takes time for markets -- markets that are inefficient tend to stay inefficient and it takes time for inefficiencies to be resolved. david: sometimes when you are a trader, which i am not, and the market moves against you, you say the market isn't smart enough to know -- surely it will come back and sometimes people wait for a long time and it doesn't come back and sometimes people like you say i made a mistake and i will get out quickly. which are you? someone that holds onto the market or get out when it goes against you? ken: the market is rarely dead wrong. history books are littered with people who are smarter than the market who lost all their money. when you are in an investment and it's not working out, you need to take a step back. what don't i understand in this situation?
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if you really think you resolved all the unknowns you can possibly get around, you stay with your position. the history books of finance, the failure stories are people who do not respect the market. david: when you started your business in the early 1990's and greate came to the recession in 2007, 2008, so forth, before we went to the recession, how big was your company in terms of employees? ken: from 1990 to 2008, we grew from effectively three people to write around 1300 people, 1400 people. great recession, many people got really hurt in that, traders, private equity people, the entire business world. how did you survive and how close did you come to not surviving?
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ken: survival is the right choice of words. it was the only moment in the history of citadel our existence was a question. if i look at the 18 years up to 2008, we never experienced a double-digit loss. north and a irr 20% had been incredibly blessed. intensityforesee the of the collapse that we were going to experience in banking system, which, being a levered money manager, put us at a very precarious position as access to financing disappeared and a portfolio of financed assets cheapened in value because no one could engage in arbitrage. we never lost 10% and at 16 weeks, we lost all of our capital. nervous theyou
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banks would call and say this game is over? ken: we were equally nervous the banks we called would not be in business. it was a bit of a bilateral street at that moment. i remember when one of the large european banks called to borrow money and i said, this is not a good day. you think you might not survive? did you ever worry about that? ken: i will make it very clear, i would go home on a friday. --morgan stanley did not if you remember, morgan stanley, the question was the japanese follow through on their financing. you quickly come to terms the fact they may not survive and it us be an event that causes to fail. i have to accept that reality and now that -- that was the playbook we came
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every day. that is -- we have to fight to survive knowing we might fail, but we will not give up. survive.u did morgan stanley survived and you built your business up in the hedge fund world to what size level are you now? ken: $30 billion and we have been there roughly three or four years. david: last year in the hedge fund world, 2018 was a difficult year for many hedge funds and many of them went out of business or shrank. you produced a profit for investors. what did you do that other hedge funds did not do last year? ken: the first thing to keep in mind is there is roughly 7000 hedge funds today. the array of activities that happen under the grooves is all over -- roofs is all over the map. what we did last year is what we try to do every year, keep a portfolio low -- in the market.
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we try to earn returns by making calls on the performance of specific companies or assets as compared to other assets. in equity space, i work with roughly 50 colleagues who are portfolio managers. they are true experts in the industries they invest in and they are trying to identify the next great success stories. we owned apple for years while apple was on an absolute tear. this is how our business works, about good old-fashioned stockpicking and trying to find companies where margins are improving, revenues are improving in a way others aren't anticipating. the founderewater, of it famously with two other people make all the investment decisions after getting input. do you make investment decisions or delegate to your investment professionals? ken: we have been here for 30, 40 minutes and in our hedge fund
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today, we will trade about 3%, 4% of the entire u.s. equity turnover. there's no blackberry, no phone. make, mydecisions we colleagues are making. i will be able to make a better decision than my analyst to covered xerox for five years or covered amgen for a decade. there is no way i will make a better call than they will. david: suppose somebody says i have a good idea, but want to put a lot of money into it. they must say they will put a lot of fund in? ken: look at pg&e, the california utility. i was with my team on this two or three weeks ago for they filed for vanke proxy --
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bankruptcy. lend the money to keep them out of bankruptcy. from a friday morning to sunday aternoon, we put together consortium of other investors and arranged a $5 billion funding facility and deliver that to the board of pg&e and the government of the state of california. when we are going to be part of that commitment, i will be involved. day in and day out, my colleagues are making calls. david: you recruited a well-known trader from another hedge fund and said you spent a fair amount of time recruiting. is that a big part of your job recruiting others to come to citadel? ballparkve interviewed .0,000 people in my career i will leave today and do two interviews tomorrow. --
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i am always looking for talent. david: what should someone do in the interview to make you like them. ? ken: what is interesting is the make you like them is a cognitive bias we have in interviewing people and you actually want to avoid being caught in that trap. what i am looking for, i am looking for two key drivers in a candidate. i am looking for their passion. do they love what they do? do they love the prompts they work on? there was a young woman who worked for us 15, 16 years ago. roughly a year or two out of a ivy league school and she came to my office and said she is toredibly talented and want go to medical school and you need to convince her to stay. ken: with all due respect, the minute she right -- walks in my office, i will offer to write
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her a letter of recommendation. the world needs another great will help her. that passion is what drives our success. i am looking for clear a prompt -- clear accomplishment. -- track record of making good decisions. david: you look for people who went to good schools, famous schools and did well or you don't care what school they went to? hire thisned off on week for someone who never went to college. he is an extraordinarily good software engineer. they find opportunity late in life and never go to college. it's helpful, the recruiting process to have gone to a great school. if you fall under the category of exceptional, there are exceptional people who never finished college. bill gates, mark zuckerberg.
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i care that you are exceptional. david: your main business has ,een the trading business trading in and out of hedge funds. you have a separate business where you make markets for other companies. can you explain that business? ken: you summarized correctly, we are in two businesses. citadel is best known for hedge fund, a 30 year business -- industry. we have made a name for ourselves. in citadel securities, we are the largest market maker in the u.s. equities market. we trade about one in five shares every day. we are also a large park it maker in fixed income -- options domestically and globally. using a number of the core competencies we originally derived citadel success from, which is predictive analytics and technology to create
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superior pricing for people in the marketplace that want to trade. guy: explain to those --david: explain to those who may not know. a market maker says i will buy your stock and you pretty much have someone to sell it to and you make a spread on it? ken: i don't have the other side and that is what makes me relevant. exchanges work perfectly when you have a concurrency of interest in buyers and sellers. you want to buy something at the exact moment somebody wants to sell it. that almost never happens. we stand in the middle willing sell soinuously buy and a retail investor or endowment or pension plan can get what they want to get done instantly. that is what we do as a market maker. we inventory the risk and recycle the risk in the marketplace when the other side materializes. understand.t
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you are looking at stocks or bonds making analysis, but you do not do the black box investing where you have come to kitted models and the computers almost make the trade. that is not what you do? ken: we do that, too. in the hedge fund, the biggest business is good old-fashioned stockpicking and that comes down to my colleagues and i take my hat off to them. it is knowing the corporate strategies and all the things y a think about when you bu company. we large -- run a large arbitrage strategy in relation to that based on the mathematics of finance. if one stock outperforms another, we will try to take advantage of the momentary discrepancy. we will do that in a fairly significant way. as: as you look -- david:
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you look at the economy today, are you worried about the u.s. economy? we haven't had a recession for about 10 years. are you worried we could go into another recession? ken: if i look at the leading economic indicators, we still appear to have fairly clear whether ahead of us. there are dark clouds and in particular, the trade dynamic between the u.s. and china is a challenge for both countries. i think -- i hope xi and trump can come to an understanding about how to create a necessary win-win for our country's. firm.market is incredibly we are seeing weight growth that of inflationaryin a decadeand e pressure. this is a good point in the american economy.
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>> one was brexit, one was u.s., china, and european trade relationships, and a third was italy. why pick italy as a major issue of concern? >> italy is the highest risk of being the next greece in europe. neutral times very for the ideal of monetary theory, which is just ridiculous. that countries can run a large deficits with no consequences. everyone seems to forget the story of what happened to greece just a few years ago, which -- the economy. italy, the income -- companies and of a rapidly aging company very poorion, policies with respect to the labor market and growth, it is creating a dynamic that is unsustainable. there is real trip edition last year in the market that italy could default. the incoming italian political
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arty for the idea of write-down of standing debt. it spooked the financial markets in europe and globally. theyssue with italy is still run too large of a deficit. they are not pursuing economic policies that will bring young members of the workforce into the labor market. >> let's talk about brexit are you worried there will be a calamity in egeland and in europe if there is not a successful brexit? 100,000 feet, the single biggest problem in the u.k. is indecision. leaves brexit it will come with it a set of challenges. if they go to a second referendum and stay in the eu, we have an idea of what that will look like. until they pick a path, it
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deters capital investment. newle are not building the factor, the new office building, they are not creating jobs in the u.k.. politicians don't appreciate when they create uncertainty, it kills, it kills the willingness of companies to invest. >> anybody watching this will see you are articulate, smart person. i want tou might say invest with this person, how does someone invest with cito? -- citadel? is there a minimum or a certain rate of return that the persian -- person should expect? so, i'm going to be the bearer of bad news. we have been closed for a long time. we are not actively soliciting new investment. you fall into one of my idols categories.
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i will figure out how to solve for. i think that is actually an important statement. your success or henry's success, those are important stories. that helped to encourage the next generation to pursue a life with passion. leave that aside. we are closed. >> let's suppose i am already in. what rate of return should i be expecting to get from my investments? 5%, 10%, 15% annual? >>
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it starts at preschool and goes through our greatest universities. i have done a lot of work in k-12 education. arenumbers involved staggering. chicago will spend $5 billion per year in k-12 education. we know how to educate in america, we just choose not to do it. i spend much more time on the it iscal front because our body of politics letting our kids down. it is inexcusable, creates so many of the problems we face today. i wish elizabeth warren had won the percent the passion -- had 1% the passion to fixed either 12. on the issue of higher
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education, america leads the world. this is not a given. want to support excellence in american education. beingr harvard or chicago at the forefront of new ideas, or whether it is behavioral work done at harvard, that impacts all higher education. it's a huge trickle down effect. . harvard is near and dear to my heart because of what it represents. it represents the greatest body of ideas in academia. place close to my heart for two reasons. my colleagues are graduates and have helped me build great firms in the world, and bob zimmerman is the president. >> he's the president? >> yes.
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he fights every day for free speech. i'm in an incredibly receptive audience. free speech is what makes our --brief -- br eathe. the universe of chicago principles, which are a mandate for free speech on college campus, i believe in it so passionately. >> in addition to your philanthropy, you have been involved in philanthropy for art artists in chicago. you are a large art collector. what is the appeal of art collecting and where do you keep most of your art? [laughter] >> i actually have a painting at home i did, and it is so profoundly -- it is beyond imagination. i have zero artistic skill. or presentve for art
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my admiration for a talent i am so dearly lacking in. ago, ited two decades was in new york, and they were auctioning off a collection. she so determined and not going to be put in her place. i was outbid. i try to buy it, the hammer went down, it wasn't my bed, and i have never been so frustrated in my life. > and you never been outbid again, right? >> there is some level of discipline, but i hung up the phone and called the next day to offer more money to the buyer. that was my start of a passion i believe art is one of
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the areas in which we can find a common ground has society. you can find an appreciation for art that brings us together. my art collection has been there for years. >> so you will have your own art museum. are you thinking of that? >> no. [laughter] fact that 700,000 to one million people have a chance to see some the greatest works and i'mf our culture fortunate enough to own it, i have great satisfaction in that. >> into recent years, you have become well-known for buying real estate. you've bought the most expensive apartment ever in new york city and maybe in the united states. you also bought a lot of property in palm beach. you have a lot of attention for this. is the attention disturbing and why have you bought all of this
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real estate? you can't live in all of these places, so what is behind it? probably be would in competition for hours spent on a plane. i probably spend 800 hours per year on a plane. in new york every single week. we have hundreds of employees here and we pay the new york investment banks nearly $1 billion a year in revenues. this is my second home, in some sense. a huge number of businesses from new york today. i'm here all of the time. i have three little kids. my ex-wife and i have made new york home. the apartment represents the possibility this might be home for me. i'm frustrated by the political winds in the city.
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amazons opting out of new york, and that is heartbreaking. when you bring a firm that is such a great user of technology into your city, it is not about the success story of amazon, it's about the fact that you have a talent magnet that creates an entire ecosystem of success stories around it. if i look at chicago, a huge number of hedge funds are my former partners. when you see success stories, those stories are not only success stories in themselves but they plant seeds of other success stories. >> where you grew up, your bought something down in florida. are you going to live down there for part of your life? >> i will, one day, retire to sunny south florida. that day keeps moving out.
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i grew up 20 miles away from palm beach. i love being down there. i hate cold weather. i can't stand cold weather. >> they have any of that in chicago? [laughter] any chance i get to escape cold, i take. nothing drives me crazier than being cold. my son loves it. it drives me nuts. you are a successful businessman, philanthropist, art collector and your parents must be very proud of you. do they call you to tell you how great they are? how do yuan of them? >> i'm certain mom is proud of me, like i'm proud of my children. i think my mom -- we don't talk about it much. i was at a conference in boca
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raton. we had a quick drink together, and i got parenting advice. we talked about raising children because that is near and dear to my heart. i have three little kids. say where dover you think the markets are going and where do you think i should invest? bush invest with citadel or does she do her own thing? >> mom doesn't need to worry about it. >> one of the problems of wealthy parents is that raising children who don't have burden, how do you deal with your wealth, visibility, and kids? how do you isolate them if possible? >> it's a great question, because in this day and age, my

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